We used to know more about money.
FINRA, the Financial Industry Regulatory Authority, keeps track, according to Gerri Walsh, president of the organization’s Investor Education Foundation, who says they’ve been doing benchmark studies testing Americans’ financial literacy every three years since 2009. The number of people who can correctly answer basic questions about interest rates, inflation, bond prices, financial risk and mortgage rates is down 8% since they started testing.
“Among the youngest people we saw the highest drop in the rate of financial literacy,” Walsh tells KTRH News, noting a drop among 18 to 34 year olds from 30% to 17%. She says her study quantifies what is happening not why, but suggests circumstances of the past decade have played a role. “The questions that ask about interest compounding, both positive and negative, that ask about inflation, those are circumstances the average American financial consumer really hasn’t encountered over the past ten years.” Interest rates have been historically low for borrowers and many investors, and inflation peaked at 3% in 2011.
What we teach in schools also plays a role, Walsh advises. “There has been a decrease in numeracy and math skills as well as in literacy generally, reading comprehension over the past ten years,” she says. Nineteen states require students be taught personal finance and Texas is among them, according to the 2017 National Report Card on State Efforts to Improve Financial Literacy in High Schools, earning a B grade.
For those needing a refresher, Walsh recommends their site.